City of London

The City of London, also known as the Corporation of London, the City of London Corporation and the Square Mile, is officially called the Mayor and Commonality and Citizens of the City of London. Though constituting only a small geographical area within Greater London itself, the City is administered by its own set of local governing bodies. George Monbiot describes its governance as ostensibly "the equivalent of a local council, responsible for a small area of London known as the Square Mile. But, as its website boasts, "among local authorities the City of London is unique". You bet it is. There are 25 electoral wards in the Square Mile. In four of them, the 9,000 people who live within its boundaries are permitted to vote. In the remaining 21, the votes are controlled by corporations, mostly banks and other financial companies."[1] As Monbiot further explains, "There are four layers of elected representatives in the Corporation: common councilmen, aldermen, sheriffs and the Lord Mayor. To qualify for any of these offices, you must be a freeman of the City of London. To become a freeman you must be approved by the aldermen. You're most likely to qualify if you belong to one of the City livery companies: medieval guilds such as the worshipful company of costermongers, cutpurses and safecrackers. To become a sheriff, you must be elected from among the aldermen by the Livery. How do you join a livery company? Don't even ask. To become Lord Mayor you must first have served as an alderman and sheriff, and you "must command the support of, and have the endorsement of, the Court of Aldermen and the Livery". You should also be stinking rich, as the Lord Mayor is expected to make a "contribution from his/her private resources towards the costs of the mayoral year."[2]

As Nicholas Shaxson explains in the 2010 edition of his publication, "Treasure Islands: Tax Havens and the Men Who Stole the World", "At its broadest, the term City of London refers to the financial services industry based in Britain, mostly located inside the so-called Square Mile that is the City. Smaller clusters of financial services activity exist elsewhere: The hedge funds in Mayfair a few underground stops farther southwest and the newer Canary Wharf, three miles east along the Thames river, are also important, hosting the spillover from the overloaded City. Neither these upstarts nor other small financial poles in places like Edinburgh or Leeds are really rivals to the Square Mile. The Corporation of London spreads a protective mantle over them all. London hosts more foreign banks than any other financial center. In 2008 the city accounted for half of all international trade in equities, nearly 45 percent of over-the-counter derivatives turnover, 70 percent of Eurobond turnover, 35 percent of global currency trading, and 55 percent of all international public offerings.24 New York is bigger in areas like securitization, insurance, mergers and acquisitions, and asset management, but much of its business is domestic, making London easily the world’s biggest international—and offshore—financial hub. The head of the Corporation of London is the Lord Mayor of London—not to be confused with the mayor of London, who runs the much larger greater London municipality that contains the City, geographically speaking, but has no jurisdiction over its nonmunicipal affairs. And this separation of powers matters. When the Queen visits the City, she stops at the boundary at Temple Bar and waits for the Lord Mayor of the City, accompanied by assorted City Aldermen and Sherriffs. This tourist ceremony, in which the Queen touches the Lord Mayor’s sword, strikingly highlights the political discontinuity between the City and the rest of Britain. When heads of state visit Britain the Lord Mayor throws more lavish banquets than the Queen. Each year the Chancellor, Britain’s finance minister, makes a speech at the Guildhall, the seat of City government, and at the Lord Mayor’s Mansion House, in which they justify how they have been serving the interests of finance."[3] In terms o fthe manner in which unique voting rights created by the City's adminstrative structure, "The City’s nine thousand–odd human residents have one vote each in municipal elections here. But businesses in the City vote too, as if they were human, with thirty-two thousand corporate votes. In effect, Goldman Sachs, the Bank of China, Moscow Narodny Bank, and KPMG can vote in a hugely important British election."[4]

Contents

Tax Haven Status

In "Treasure Islands", Shaxson states that "Few British people, let alone anyone else, know that the City of London is the most important financial center in the global offshore system. Before getting properly into the strangeness of this ancient city, some of its more obvious offshore qualities are worth noting. London’s first claim to be a tax haven is the subject of this chapter: its role as the creator and developer of the Euromarkets, Wall Street’s giant escape route from the checks and balances of U.S. financial regulation. Here the subsidiaries and affiliates of U.S. commercial banks have long been allowed to engage in, among many other things, investment banking—“casino banking,” as some have called it—something the Glass-Steagall Act of 1933 explicitly prohibited. Over the years, as this business became more integral to their global banking models, Wall Street could increasingly pressure the U.S. government to do away with the original restrictions to allow them to do at home what they already did offshore, and this was arguably the main factor that led to the repeal of Glass-Steagall in 1999. It was the classic offshore pattern: banks find an offshore escape route, then say in Washington, “We can already do this offshore—so why not here?”—and domestic regulations get relaxed."[5] As Shaxson further explains, "London provides endless loopholes for U.S. financial corporations, and many U.S. banking catastrophes can be traced substantially to those companies’ London offices. The unit that blew up the insurance company American International Group (AIG), putting the U.S. taxpayer on the hook for $182.5 billion, was its four hundred–strong AIG Financial Products unit, based in London. The court-appointed examiner looking into the collapse of Lehman Brothers in September 2008 found it had used a trick called Repo 105 to shift $50 billion in assets off its balance sheet, and that while no U.S. law firm would sign off on the transactions, a major law firm in London was delighted to oblige, without breaking the rules.15 When the United States introduced the Sarbanes-Oxley regulations to protect Americans against the likes of Enron or Worldcom, the City of London did not follow, and more U.S. financial business flowed to London."[6]

Britain is ruled by the banks, for the banks, "Is David Cameron's kid-glove treatment of the City remotely justified, when it neither pays its way nor lends effectively?", Aditya Chakrabortty, The Guardian, Monday 12 December 2011. Accessed December 15, 2011.

The tax haven in the heart of Britain, "There is an institution with a murky history and remarkable powers that acts like a political and financial island within our island nation state. Welcome to the Square Mile and the City of London Corporation.", Nicholas Shaxson, New Statesmen, 24 February 2011. Accessed December 15, 2011.

London tops the poll, Observations on corruption, "No financial centre plays a bigger role in supply-side corruption than London.", Sam Alexandroni, New Statesman, 04 October 2007. Accessed December 15, 2011.